Nov/Dec RIA Roundup: Rental Property Maintenance Costs, Avoiding Estate Taxes, & Mocha Mousse
Happy holidays, investors! It has been a busy fall for me, which necessitated a combined November-December issue. Double your fun!
Lead Story: The TRUE cost of maintaining rental properties
If you’re an experienced investor, you know how to run the numbers on a rental property. But there’s one component of your financials where reality can diverge significantly from your estimates: your maintenance & repair costs.
Are your estimate appropriate and accurate? And what is the ACTUAL cost of maintenance over time?
In my latest long-form article, I use seven years of data from my own portfolio to examine this question. The takeaways are super valuable, because they point toward certain buying strategies you should be considering if you’re looking to keep your maintenance costs in check.
Also on the RIA blog this month:
Portfolio Reports: I’ve thankfully recovered a bit of ground this fall after a high-expense summer. My cash flow for both October and November exceeded $12,000. Check out all the details in the October and November monthly reports. (PS — my 2024 annual report will be published next month!)
An oldie but a goodie: The tax advantages of rental investing is the third leg of the stool that makes rentals such an attractive and lucrative path (the others being high yield, aka cash flow, and the ability to leverage with mortgages). With year-end approaching, it’s a good time to review the powerful tax benefits of rental properties.
My picks from around the web this month:
The New York Times published a jaw-dropping story about how Nvidia founder Jensen Huang will avoid $8 billion dollars in estate tax through creative strategies involving trusts and “charitable” foundations. Many other ultrawealthy people use the same tax tricks. It all STINKS, and this is a must-read.
Paula Pant leads a great conversation with Christine Benz about the transition from saving for retirement to spending during retirement.
An episode of The Daily explores how a project in Austin, Texas is implementing new ideas and solutions provide affordable housing for chronically homeless people.
Katie Gatti produced this 4-minute history of the last 40 years of US economic history. If you feel like things aren’t like they used to be…you’re right, and this is why.
Great visual explainer on how ranked-choice voting works.
And now this!
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In Other News…
Photo Quiz!
Why were these three images in the news recently? Keep reading for the answers…
Real Estate & Business, Domestic News
First-time homebuyers getting older and richer. The median age rose to 38, a new record, while the median income rose to $97,000/yr. The recent trend no doubt reflects the increased buying power need to buy a home thanks to price increases and higher interest rates – but it may also reflect younger generations more positive views on renting vs. owning.
Another NAR rule under legal pressure. With the cooperative compensation rule now dead, another policy from the National Association of Realtors is under threat: the one that requires publicly advertised properties to be listed on MLS.
Trump’s tariff regime comes into focus. The President-elect announced/threatened 25% tariffs on Canada and Mexico. Nearly all economists think this will be bad.
Boeing strike ends. Ending a 7-week strike, machinists voted to accept the company’s third contract offer, which provides for 43% raises over the next 4 years, along with a $12K ratification bonus.
Bitcoin hits $100,000. For the first time, the cost of a single Bitcoin hit $100,000. After 15 years, this “currency” still can’t be used to buy much of anything in the real world, making clear that it (and its hundreds of imitators) behave much more like stocks than dollars – except with no real-world company or assets behind them.
CEO of massive health insurer murdered. Brian Thompson, the CEO of United Healthcare, was shot and killed outside a Manhattan hotel. (Matt Stoller wrote a truly excellent and thought-providing take on this attack, as did JP Hill.)
International News, Science & Technology
Australia bans social media for kids. Within one year, social media companies will have to comply by ensuring that no kids under 16 are on their platforms. They are the first country to put firm age restrictions in place for social media.
Assad regime falls in Syria. A two-week offensive from anti-government rebels ended the 50-year reign of the dictator’s family. Assad fled the country to Russia, which had supported his regime.
Notre Dame cathedral reopens (A). Five years after a massive fire nearly destroyed the iconic landmark, it reopened to great fanfare in France, and looked better than ever after centuries of soot and grime were removed from all it surfaces.
Arts & Culture, Sports, and All the Rest
Quincy Jones dies. With his original roots in jazz performance and arranging, the incomparable producer’s career spanned six decades, and nearly every niche in entertainment. See his life in photos.
Domestic box office rebounds. It’s no secret movies have been struggling, but a series of hits – Wicked, Gladiator II, and Moana 2 – have buoyed the box office. Hooray for sequels and repackaged content!
Rockefeller Center tree is lit (B). As a New Yorker for 20 years, I had not seen the tree in person for over a decade — it’s a tourist thing, not for actual New Yorkers. I had the chance to see it last year, and gotta say…it’s really something.
The Pantone color of the year is…brown (C). Well, technically it’s “mocha mousse”…which is just Don Draper-ed brown.
Final Thoughts: “Health” “Care”
Why is it necessary to put BOTH “health” and “care” in quotation marks? Most likely, you already know why.
Most likely, you’ve already seen the abject brokenness of our health care system up close, or know someone who has. You’ve likely already felt the fear of losing your health insurance at the same time you lose a job; or you’ve felt the cold chill of getting a big unexpected bill, even you ARE insured; or you’ve felt the hot anger of tying to navigate a system that is made complex on purpose, designed to frustrate you, engineered not for health but for profit.
Or worst of all, you’ve had an insurance claim denied that meant you had to mount a fight against your insurance company, else face the consequences of a large medical bill that you might not have the means to pay. Over 90% of Americans now have insurance coverage, and yet medical bankruptcies are all too common, and 58% of all debts recorded in collections are from medical bills.
The public’s somewhat indifferent response to the murder of United Healthcare CEO Brian Thompson was telling. Other than the lunatic fringe, people weren’t celebrating the act, but neither were they moved to deeply mourning the loss. Mostly, they seemed to be saying, “yeah, I can understand how our health care system could drive someone to this.” Which is a pretty alarming indictment of our system.
A few important caveats here. First, it’s important to separate providers from insurers in this conversation. People generally don’t despise their doctors, dentists, and nurses; they reserve their hatred for their insurance companies, whose only purpose seems to be to wring as much profit as possible out of the system, make it more difficult to use, while providing no incremental benefit whatsoever. (I’m lucky to have more than a few friends who are doctors, and trust me, they hate insurance companies as much as you do.)
Second, we don’t yet know all that may have motivated Luigi Mangione to commit this crime, the extent to which mental illness and/or online radicalization contributed to his act, or why he targeted Mr. Thompson specifically. These details will come into better focus in time.
But the fact remains: people are angry at this system — so much so that they basically shrugged off the cold-blooded murder of a CEO. Personally, I get it, because nothing drives me into a white hot rage than basically any interaction I have with the health insurance industry. It does seem like most other developed countries have devised better systems, and it’s pretty well-known by now that we spend more on health care than other countries while achieving worse health outcomes.
But it’s the actions of insurance companies that really rankle us. For example, this Senate report shows how the nation’s three largest insurers have recently used deeply flawed automated system to evaluate (and deny) claims. The report found that as a result, between 2019 and 2022, UnitedHealth’s post-acute services denial rate nearly tripled from 8.7% to 22.7%. That doesn’t sound like a change in the claims, or in medical practices; it sounds like someone realized that the fastest way to make an insurance company more profitable is to stop paying.
Brian Thompson became CEO in 2021, btw. Even if he was responsible for UHC becoming the industry leader in denying claims, leading to a huge boost in the company’s profits, that certainly doesn’t mean that he deserved to be murdered by a vigilante.
But if the public response to his murder seemed a bit callous, perhaps that because our daily treatment at the hands of health insurance companies is often callous as well. We’re asked to pay 10% more every year for our premiums — the cost of family coverage now exceeds $25,000 per year — while we seem to get less and less for our money, if we get anything at all. Nobody is under the illusion that their health insurer “cares” at all about their “health”.
JP Hill’s take on all this is the one that has stayed with me: "What we’re called to ask is why the murder of one man must be described as unspeakable violence, but the systemic denial of life to 100,000 people is an acceptable business practice.”
I wrote an essay a few months ago about the common good, and the need for strong guardrails on the capitalist system to prevent abuses and protect the general welfare. Our health system, in particular the role played by health insurers, is another arena where the super-wealthy and large corporations are trampling all over the common good.
The reaction to Brian Thompson’s murder proves just how deeply Americans understand this.
Happy investing,
Eric
About the Author
Hi, I’m Eric! I used cash-flowing rental properties to leave my corporate career at age 39. I started Rental Income Advisors in 2020 to help other people achieve their own goals through real estate investing.
My blog focuses on learning & education for new investors, and I make numerous tools & resources available for free, including my industry-leading Rental Property Analyzer.
I also now serve as a coach to dozens of private clients starting their own journeys investing in rental properties, and have helped my clients buy millions of dollars (and counting) in real estate. To chat with me about coaching, schedule a free initial consultation.
Free Rental Property Analyzer
You probably know that a well-designed rental property calculator is the most important tool a real estate investor has. It allows you to quickly calculate key metrics and understand your cash returns on a target property. You can also answer questions like:
How much do your cash-on-cash returns improve if you use a mortgage vs. paying in cash?
What will your average monthly cash flow be?
How will your returns change in future years?
Those questions can be easily answered with side-by-side comparisons in the RIA Property Analyzer. I guarantee this is the best free rental property calculator out there today, and many of my readers have told me the same. It’s both powerful and very simple and intuitive to use. Check it out!
